The Accounting Information System p. 1
Accounting and Organizations p. 2
Information for Decisions p. 3
The Accounting Process p. 5
Summary Reports p. 6
Steps In the Accounting Process p. 6
Uses of Accounting Information p. 7
The Purpose of Organizations p. 8
Transformation of Resources p. 9
Creation of Value p. 10
An Illustration of Creating Value p. 11
Investment by Owners p. 11
The Market for Investors p. 12
Decisions in Organizations p. 13
Financing Activities p. 13
Investing Activities p. 18
Operating Activities p. 19
Summary of the Transformation Process p. 21
Definition of Accounting p. 22
Accounting as a Profession p. 23
Management Accounting p. 23
Public Accounting p. 23
Governmental and Nonprofit Accounting p. 24
Education p. 24
A Short Introduction to Excel p. 24
Identifying and Selecting Cells p. 24
Referencing and Mathematical Operations p. 24
Copying Cell Contents p. 25
Changing Column Widths p. 25
Menus p. 26
Buttons p. 26
Information in Organizations p. 48
Information for Decision Makers p. 49
Risk and Return p. 50
Evaluating Exchanges p. 51
Financial Accounting p. 54
Managerial Accounting p. 55
Information Systems p. 56
Management Information Systems p. 57
The Accounting Information System p. 58
Processing Accounting Information p. 60
Assets, Liabilities, and Owners' Equity p. 60
Revenues and Expenses p. 61
An Illustration of an Accounting System p. 62
Preparation for an Accounting Career p. 66
Accounting Measurement p. 92
Accounting for the Transformation Process p. 93
Accounting for Incomplete Transformations p. 96
Time and Accounting Measurement p. 97
Cash Flows p. 97
Cash Flows from Operating Activities p. 98
The Accrual Basis of Accounting Measurement p. 99
Reconciling Accrual and Cash Measurements p. 104
Measuring the Transformation Process p. 104
Accrual Basis Financial Statements p. 108
Income Statement p. 108
Statement of Cash Flows p. 108
Balance Sheet p. 108
The Historical Development of Accounting p. 110
Historical Developments to the Early 1900s p. 110
Federal Regulation in the 1900s p. 111
Processing Accounting Information p. 138
Using the Accounting Cycle to Process Transactions p. 139
Double-Entry Bookkeeping p. 142
Debits and Credits p. 142
Computer Processing of Accounting Data p. 146
Sales and Distribution p. 146
Purchasing and Inventory p. 150
Payroll p. 153
Nonroutine Transactions--Adjusting Entries p. 156
Nonroutine Transactions--Closing Entries p. 157
Computerized Accounting Systems p. 159
Relational Databases p. 159
Computer Networks p. 161
Internal Controls p. 163
Management Philosophy p. 163
Computer System Controls p. 163
Human Resources Controls p. 164
Physical Controls p. 164
Conclusion p. 164
Setting Accounting Standards p. 165
The Financial Accounting Standards Board p. 165
The Governmental Accounting Standards Board p. 165
The International Accounting Standards Committee p. 165
Module The Database Environment: A Demonstration Case p. 189
Exetor Woolen Goods p. 190
Copying and Opening the Database p. 190
Database Contents p. 190
Relational Databases p. 194
Reporting Accounting Information p. 195
The Purpose of Financial Statements p. 196
Income Statement p. 197
Statement of Stockholder's Equity p. 197
Balance Sheet p. 197
Financial Statement Content and Presentation p. 197
The Income Statement p. 197
The Statement of Stockholder's Equity p. 204
The Balance Sheet p. 205
Use of Financial Statements p. 210
Interrelationships among Financial Statements p. 210
Consolidated Financial Statements p. 211
Limitations of Financial Statements p. 212
Usefulness of Financial Statements p. 213
Financial Statements and the Transformation Process p. 213
Other Information Accompanying Financial Statements p. 214
Creating Accounting Standards p. 216
Financial Reporting: The Statement of Cash Flows p. 252
The Statement of Cash Flows p. 253
The Direct Format p. 253
The Indirect Format p. 257
Summary of Adjustments for the Indirect Method p. 259
Interpreting Cash Flows p. 260
The Conceptual Framework for Accounting Standards p. 263
Analysis and Interpretation of Financial Accounting Information p. 295
The Time Value of Money p. 296
Future Value p. 297
Compound Interest p. 298
Future Value of an Annuity p. 299
Present Value p. 304
Present Value of an Annuity p. 305
Loan Payments and Amortization p. 308
Unequal Payments p. 311
Combining Single Amounts and Annuities p. 312
Summary of Future and Present Value Concepts p. 312
Financing Activities p. 329
Types of Obligations p. 330
Debt Obligations p. 331
Short-Term Debt p. 331
Long-Term Debt p. 331
Debt Transactions p. 332
Financial Reporting of Debt p. 336
Other Obligations p. 337
Contingencies p. 337
Commitments p. 337
Capital Leases p. 338
Stockholders' Equity p. 339
Contributed Capital p. 340
Retained Earnings p. 341
Changes in Stockholders' Equity p. 342
Equity Transactions p. 343
Cash Dividends p. 344
Issuing New Stock p. 344
Stock Dividends p. 344
Preferred Stock p. 345
International Reporting of Financing Activities p. 346
Additional Financing Activities p. 347
Analysis of Financing Activities p. 369
Financing Decisions p. 370
Capital Structure Decisions p. 370
The Effect of Financial Leverage p. 372
Effects of Financing Decisions on Cash Flow and Liquidity p. 375
Dividend Decisions p. 376
Other Financing Activities p. 377
Interpretation of Financing Activities p. 377
A General Overview p. 377
Comparing Capital Structures p. 378
The Effect of Financial Leverage on Risk and Return p. 379
Other Risk Considerations p. 380
Financing Activities and Company Value p. 382
Investing Activities p. 405
Types of Assets p. 406
Property, Plant, and Equipment p. 407
Plant Asset Cost p. 407
Depreciation p. 409
Disposing of Plant Assets p. 413
Natural Resources p. 414
Long-Term and Short-Term Investments p. 415
Types of Securities p. 415
Held-To-Maturity Securities p. 416
Trading Securities and Available-For-Sale Securities--Investments in Debt p. 417
Trading Securities and Available-For-Sale Securities--Investments in Equity p. 417
Short-Term Investments p. 419
Intangible Assets p. 420
Other Long-Term Assets p. 421
Financial Reporting of Investing Activities p. 421
Other Investment Issues p. 423
Equity Method p. 423
Consolidations p. 424
Analysis of Investing Activities p. 447
Investing Decisions p. 448
Investment Decisions and Profit p. 450
Investment Decisions and Risk p. 451
Interpretation of Investing Activities p. 454
Identifying Investing Activities p. 454
The Importance of Asset Growth p. 456
Measuring the Effects of Growth p. 456
The Effect of Investment on Effectiveness and Efficiency p. 458
Investing Activities and Creditor Decisions p. 459
Operating Activities p. 482
Basic Operating Activities p. 483
Revenues and Receivables p. 483
Recognizing Revenue for Long-Term Contracts p. 484
Sales Discounts and Returns p. 485
Uncollectible Accounts p. 487
Warranty Costs p. 487
Inventories and Cost of Goods Sold p. 489
Reporting Inventories and Cost of Goods Sold p. 489
Measuring Inventory p. 492
Inventory Estimation and Income Taxes p. 493
Comparing Inventory Costs Among Companies p. 495
Other Operating Activities and Income Statement Items p. 496
Operating Expenses p. 496
Other Revenues and Expenses p. 497
Income Taxes p. 497
Special Items p. 497
Other Topics p. 498
Equity Income p. 499
Minority Interest in Income p. 499
Deferred Compensation p. 499
Perpetual and Periodic Inventory Systems p. 500
Analysis of Operating Activities p. 528
Operating Decisions p. 529
Developing an Operating Strategy p. 531
Interpretation of Operating Activities p. 533
Cost Leadership and Product Differentiation Strategies p. 534
Comparing Accrual and Cash Flow Measures of Operating Performance p. 536
Further Evaluation of Operating Strategy p. 536
Linking Operating and Investing Activities with Financing Activities p. 538
The Big Picture p. 540
Sources of Information about Companies and Industries p. 1
General Mills, Inc. 1998 Annual Report p. 3
Glossary p. 1
Index p. 1